Some 61% of fund selectors our researcher met on her trip to Helsinki earlier this month plan to increase 
allocation to European equities in the next 12 months, while none of the interviewees will decrease their exposure. This is a degree of confidence in European stocks last seen in 2012, when the current bull market run had just started. According to the Finns, all signs are green at the moment: European companies and consumers alike will benefit from the lower oil price and the cheaper euro will boost profit margins of exporting companies. All these positive factors have not yet been fully priced in, they believe.
The American paradox
For US stocks, the stars are aligned quite differently. Though there has been a lot of good news coming 
from the US in recent months, Finnish fund selectors expect no further positive surprises, leading to the remarkable paradox that investors are negative about the return perspectives for the world’s best performing economy. Many fund selectors are therefore replacing part of their US equity allocation with European equities. While the currency and the monetary policy are seen as positive for European equities, they are regarded a liability for US stocks. Even those who do not plan to decrease their weighting to the asset class all say they are selective, preferring stocks with mainly domestic exposure.
ETFs: a tool for tactical allocation?
When it comes to index-tracking products, Finns are enthusiastic and relatively sophisticated users. Some 85% of fund selectors have exposure to (mainly equity) ETFs, and most of those want to buy more. The majority of interviewees believe 2015 will be a better year for active managers than last year because 
market volatility is edging higher. Many still plan to use more passive strategies though.
Ironically, this is partly for the same reason. As they expect increasingly volatile markets, many interviewees expect to change their asset allocation more aggressively this year, and they find ETFs a very quick, efficient and affordable tool to take market views. A couple of fund selectors from banks said they especially like ETFs as an instrument for rapid tactical bets.
